Board Members Turn To You For Help Norma Houston Master Clerks - - PDF document

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Conflicts Of Interest: When Your Board Members Turn To You For Help Norma Houston Master Clerks Academy November 30, 2018 Gifts & Favors Conflicts of Interest in Voting CONFLICTS OF INTEREST IN VOTING www.sog.unc.edu Page 1 Norma

SLIDE 1

Conflicts Of Interest: When Your Board Members Turn To You For Help

Norma Houston Master Clerks Academy November 30, 2018

Conflicts of Interest in Voting Gifts & Favors

CONFLICTS OF INTEREST IN VOTING

Norma Houston UNC School of Government www.sog.unc.edu Page 1

SLIDE 2

Duty to Vote

State law imposes on board members a duty to vote unless there is a statutory basis:

1. Prohibiting the vote, or
2. Being excused from voting

Legal Authority for Being Excused from Voting (G.S. 160A-75; 153A-44)

Prohibited When: ▪ Legislative zoning decisions

in which member has a financial interest

▪ Quasi-judicial decisions in

which member has a fixed

pinion, bias, financial

interest, or close personal relationship

▪ Public contracts from

which member or spouse derive a direct financial benefit

May Be Excused If:

▪ Matter before board

involves member’s own financial interest

▪ Matter before board

involves member’s

fficial conduct

“Own Financial Interest”

Board member MAY be excused from voting
No definition of “own financial interest”
Factors to consider:
Number of people affected
Extent of financial interest (positive or negative)
Likelihood of impact

Many people Nominal impact Remote likelihood Board member only Significant impact Strong likelihood

Norma Houston UNC School of Government www.sog.unc.edu Page 2

SLIDE 3

If you’re involved at any point in the contracting process, you’re involved in “making or administering” the contract

Making or administering a contract

Self-Benefiting in Public Contracting

G.S. 14-234(a)(1)

There’s a direct benefit if you or your spouse:

1. Own more than 10% of the company,
2. Receive income or commission from the

contract, or

3. Acquire property under the contract

Direct benefit to you or your spouse Making or administering a contract

Self-Benefiting in Public Contracting

G.S. 14-234(a)(1)

Self-Benefiting in Public Contracting

G.S. 14-234(a)(1)

*Unless an exception applies: banks and utilities, friendly condemnation, spouse employment, public assistance programs, small jurisdictions

Direct benefit to you or your spouse Making or administering a contract Class 1 misdemeanor* & void contract*

Norma Houston UNC School of Government www.sog.unc.edu Page 3

SLIDE 4

Self-Benefiting in Public Contracting

G.S. 14-234(a)(1)

Not like other financial conflicts -

cannot cure this conflict by being excused from voting

Unless an exception applies,

cannot enter into contract – period!

If exception applies, conflicted
fficial cannot participate or vote

What Do You Think – Ethical v Legal?

Nonprofit Board Sister Permit Sister Contractor Councilmember Vendor

Is it Ethical? Nonprofit Board

A city council member also serves on the board of the local nonprofit arts council. The arts council is seeking grant funds from the city to support its annual craft fair. The grant request comes before the city council for consideration. Is it ethical for the council member to participate in the discussions and vote on the grant award? Norma Houston UNC School of Government www.sog.unc.edu Page 4

SLIDE 5

Is It Legal? Nonprofit Board

A city council member also serves on the board of the local nonprofit arts council. The arts council is seeking grant funds from the city to support its annual craft fair. The grant request comes before the city council for consideration. Is it legal? Yes. Assuming no financial benefit, the council member is required to vote.

Conflict of Roles?

Service on nonprofit is not a

financial conflict and missions may be in alignment

But consider possible future

conflicts:

Legal or financial dispute –

commissioner on both sides

Expectation of allegiance by both

boards

Confidentiality of information

Is It Ethical? Sister Permit

A county commissioner’s sister is a local developer and has applied for a special use permit for a major project in city. Is it ethical for the commissioner to vote

n her sister’s permit application?

Norma Houston UNC School of Government www.sog.unc.edu Page 5

SLIDE 6

Is It Legal? Sister Permit

A county commissioner’s sister is a local developer and has applied for a special use permit for a major project in city. Is it legal? No. Because consideration of a special use permit is a quasi-judicial matter, the commissioner has a conflict of interest because the applicant is a family member and is prohibited from voting.

Is It Ethical? Sister Contractor

A city council is considering awarding a major construction contract to a council member’s sister. The sister’s company is the lowest responsive, responsible bidder. Is it ethical for the council member to vote

n her sister’s construction contract?

Is It Legal? Sister Contractor

A city council is considering awarding a major construction contract to a council member’s sister. The sister’s company is the lowest responsive, responsible bidder. Is it legal? Yes. Assuming no financial benefit, the council member is required to vote. Norma Houston UNC School of Government www.sog.unc.edu Page 6

SLIDE 7

Is It Ethical? Commissioner Vendor

A recently elected county commissioner owns a t-shirt company. The Parks & Rec Department has regularly purchased uniforms for its little league teams from the commissioner’s company. Is it ethical for the county to continue to purchase t-shirts from commissioner’s company after he takes office?

Is It Legal? Commissioner Vendor

Is it legal? No. Once the member takes office, continuing to purchase t- shirts from his company is prohibited unless the “small jurisdiction” exception applies. A recently elected county commissioner owns a t-shirt company. The Parks & Rec Department has regularly purchased uniforms for its little league teams from the commissioner’s company.

Can Board Member Vote? 2 Questions:

1. Does the Matter

Involve . . .?

2. Does Member Have A . . .?

If So . . .

Legislative Land Use

(examples: rezoning or text amendment)

Direct, substantial, and readily identifiable financial interest in the matter Cannot participate or vote Quasi-Judicial Hearing

(examples: special use permit or appeal of a personnel decision)

Fixed opinion prior to the hearing, undisclosed ex parte communications, close familial, business, or other relationship with an affected person, or financial interest in outcome Cannot participate or vote Contract Prohibited direct benefit that would be derived by member or member’s spouse under the contract and the contract is allowed under an exception Cannot participate or vote All Other Matters Financial interest in the matter or the matter involves member’s own official conduct May be excused from voting

Norma Houston UNC School of Government www.sog.unc.edu Page 7

SLIDE 8

How to Manage Perceptions

Many local codes of ethics require all governing board members to “avoid the appearance of impropriety in the exercise of their official duties.”

If a board member is required by law to vote, how might the member manage the perception that he or she has a conflict of interest?

GIFTS & FAVORS Gifts and Favors from Contractors

G.S. 133-32 Prohibited Giver: Contractor or vendor who is:

1. Past (within 1 year)
2. Current
3. Potential future

= Class 1 misdemeanor, unless an exception applies Norma Houston UNC School of Government www.sog.unc.edu Page 8

SLIDE 9

Gifts and Favors from Contractors

G.S. 133-32 Prohibited Recipient: Public officer or employer who:

1. Prepares plans or

specifications for public contracts, or

2. Awards or administers

public contracts, or

3. Inspects or supervises

construction